Introduction To financial Accounting MT2

Gross Profit

sales revenue- COGS

Net Income

Gross Profit-operating expense

perpetual system

Maintain detailed records of the cost of each inventory
purchase and sale.
• Records continuously show inventory that should be on
hand for every item.
• Company determines cost of goods sold each time a
sale occurs.
• Record both revenue & cost-of-goods sold at time of sale

Periodic System

Do not keep detailed records of the goods on hand.
• Cost of goods sold determined by count at the end of the
accounting period. Record only revenue at time of sale

Journal entry for purchasing inventory on account

D: Inventory C: Accounts Payable

FOB shipping Point

freight costs incurred by the buyer are included in cost of inventory.

Buyer pays for freifhtcost

FOB Destination 

Freight costs incurred by the seller are an operating expense

Seller pays freight cost

Journal entry for returns

D: Accounts receivable C: inventory

2/10, n/30

.02% discount within 30 days

Journal entry For Discounts

D:Accts Payable (The amnt payed) C: Cash(The price after discount), Inventory (Amt of discount)

Journal entry if failed to be within the time of the discount 

D:Accounts Payable C:Cash 

Journal entries for Recording Sales of Merchandise

D:Accounts Receivable 3,800
C:Sales Revenue 3,800

D:Cost of Goods Sold
C:Inventory

Journal entries for returns with a value

Sales Returns & Allowances
    Accounts Receivable

Inventory
    Cost of Goods sold

Journal entry for buying someone buying your merchandsie on acct

Accounts Receivable 1,500
Sales Revenue 1,500
Cost of Goods Sold 800
Inventory 800

Journal entry for return with value

Sales Returns and Allowances
Accounts Receivable
Inventory
Cost of Goods Sold

Journal Entry for overcounted Inventory

Cogs

   Inventory

specific identification

sell lowest and highest- physical movement

cost Flow assumptions

FIFO, LIFO, Average Cost

COGs

(Beggining inventory+ Purchases)- ending inventory

average cost

total cost/ total units = Average Cost (its between Lifo and FIFO)

3 points of fraud triangel

oppurtunity, finacial pressure, rationalization

Internal control so we can

Efficient, Safe gaurd assets, Keep records, and laws and regulations.

Principals of internal control

human resource, Physical controls, Verification, Seggregation of duties, Establish responsiblity, Documentation

bank reconciliation

is a comparison of the bank’s records to the
company's own records of cash transactions

Control feautres of a BAnk account

Minimizes the amount of currency on hand. Cash is stored
with bank, which is generally more secure (& insured).
• Creates a duplicate record of cash transactions.

Per Bank Statment 

• deposit in tansit

• -outstanding checks

• +/-bank errors

Per Book Statement

+EFT

-NSF

-Service Charge

+/-comany errors

Journal entry for EFT

Cash

    Accounts receivable

Journal Entry for NSF CHeck

Accounts recivable

Cash

Journal entry for bank service charge

bank Charge expense

Cash